By: Alexander Ochs and Will Bierbower
Several news items out of Europe in recent weeks demonstrate that the European Union is continuing to lead the push for policies that reduce greenhouse gas emissions and reliance on oil imports. The United Kingdom released its Carbon Plan with concrete steps for how the country will meet its target of cutting carbon dioxide emissions 34 percent below 1990 levels by 2020, and the EU continues to prepare for the third phase of its Emissions Trading System (EU-ETS).
The European Commission also officially approved a roadmap last week outlining how the EU can meet its long-term goals to streamline and coordinate transportation across member states. In the plan are 40 initiatives meant to help build a transportation system that increases mobility and improves security and safety, while reducing carbon emissions and reliance on oil imports.
The Commission expects that carrying out the roadmap’s initiatives will facilitate a 60 percent cut in carbon emissions from 1990 levels in the transportation sector by 2050. The EU has already set an overall carbon emissions reduction target of 80 percent from 1990 levels by 2050. The target for transportation, despite being lower than the overall goal, is ambitious given that this is the only sector in the EU where emissions have continued to rise from 1990 levels. Transportation emissions have grown more than 25 percent in the past 20 years, due in large part to the inertia of current transportation infrastructure and a lack of economically viable alternatives to fossil fuels.
Integrating national transportation systems into a single EU-wide transportation region will involve working through numerous technical, legal, and administrative obstacles. One of the biggest challenges for any European-wide strategy is harmonizing standards across the union. This is also one of the areas where roadmap finds the biggest potential for change. Harmonizing national standards facilitates a more cohesive marketplace, which lowers transaction costs, increases the efficiency of political action, and facilitates the adoption of new technologies. The roadmap lays out plans to make mandatory the EU’s voluntary CO2 emissions standards for vehicles, to improve the labeling of vehicles for CO2 emissions and fuel economy, to implement new noise standards for engines and new standards for information and communications technologies in vehicles and infrastructure, as well as to develop interoperability rules for infrastructure such as electric vehicle charging stations.
The roadmap also calls for restructuring transportation fees and taxes in ways that more accurately reflect the total cost of transportation. The rationale behind this is that end-users will change their behavior in ways that improve well-being for all members of society when they receive the appropriate price-signals in the market. Take, for an example, toll roads. Each time a vehicle drives on a toll road, a driver pays a fee for using the road. Frequent drivers pay a larger share of the costs for building and maintaining the road than do infrequent drivers, which helps reduce emissions and traffic congestion by discouraging people from driving long distances. It also saves money for the government and taxpayers.
Going one step further, if the real cost to society of building and maintaining streets were internalized in the price of buying a car or pumping gas, public transportation would become a more competitive alternative, and people would likely use buses or trains more often than their own vehicles. This, in turn, reduces both environmental and economic costs to society.
Determining the right price levels is a challenge because it involves measuring the costs of building and maintaining infrastructure, such as roads and bridges, and accounting for costs borne to society from CO2 emissions and noise pollution. It also involves a number of assumptions regarding future price developments, population growth, etc. Once the assumptions are complete, calculations are made, and pricing is in place, then developing innovative technologies such as electronic toll collection systems can help charge the costs to the users (of infrastructure), benefiters (of public goods), and polluters (of our natural resources).
The roadmap suggests several initiatives for shifting to the polluter-pays and user-pays principles. The initiatives include: revising the motor fuel taxation to clearly define which components are for energy and which are for carbon, charging heavy-duty vehicles a fee for infrastructure wear and tear, and developing greater transparency on how public funding is used for transportation. Restructuring the price signals will also involve revising incentives that conflict with improving the efficiency of transportation. These could include the tax write-offs businesses receive for company cars, energy tax exemptions for sea and air transportation, and value-added taxes.
Finally, the roadmap identifies the need to develop an EU-wide strategy for funding research and development. R&D is vital for spurring technological innovations such as new engines, materials, and design; cleaner fuels and more efficient propulsion systems; and better information and communication systems. Governments can employ a number of legal and financial instruments to move technology from the R&D stages to product deployment on the European and global markets. These could include the EU providing loan guarantees to developers that manufacture and develop new technologies, removing legal red tape for projects, and even limiting liability of companies for unforeseen risks from new technologies.
Without proper coordination of these instruments, spending is often redundant and wasteful. The transportation roadmap suggests initiatives to coordinate strategies for rapidly deploying technologies from the research to the market phase. One suggestion is to create a technology roadmap to foster partnerships and coordinate funding. Another initiative is the Commission’s Strategic Energy Technology Plan, which aims at accelerating the development and deployment of cost-effective low-carbon technologies through single or complementary sets of technologies.
The EU roadmap lays out an ambitious and comprehensive toolkit that can be employed in order to stop and reverse current emissions trends in the transportation sector. It is less clear, however, about how exactly individual components should be designed. This fine-tuning will most likely take years of negotiation among member states. But the basic pillars, and a vision of a long-term 2050 low-carbon transport strategy, are laid out. This vision is an important first step and can serve as a key reference for the discussion of next steps. Already, the number of petrol filling stations in the UK has been halved since 1992.